EIGHT years after he adopted an exceptionally low profile, Britain’s most vilified banker – Fred “the Shred” Goodwin – will be under the public spotlight again today as Royal Bank of Scotland braces itself for a £700 million court battle with thousands of shareholders.
Goodwin, 58, the bank’s former chief executive, who was stripped of his knighthood following RBS’s near collapse during the financial crisis, will be forced to defend his role in the debacle during a trial expected to last for 14 weeks at the High Court in London. It will be the first time he has been forced to publicly account for the bank’s £45 billion taxpayer bailout since politicians on the Treasury select committee questioned him in 2009.
Goodwin and a team of his former executives face a public grilling as part of the action brought against the bank by 9,000 retail investors and 18 institutions in the RBS Shareholder Action Group.
The legal action centres on a rights issue Goodwin oversaw in April 2008 when RBS asked existing shareholders to pump £12bn into the bank after leading a consortium that spent £49bn buying Dutch bank ABN Amro.
Shareholders claim they were left nursing heavy losses following the cash call after RBS shares plunged 90 per cent and the UK Government was forced to step in when the deal turned toxic.
Despite RBS making significant headway in resolving the dispute, it has been unable to strike a deal with the last tranche of shareholders, with any chance of a last-ditch settlement proving a distant hope. The bank has already settled with investors representing 87 per cent of the claims by value - although it has not admitted liability - leaving 13 per cent outstanding.
While the court case begins today, Sir Tom McKillop, former RBS chairman, will not appear until June 7, with ex-finance chief Guy Whittaker giving evidence on June 13 and former head of RBS investment bank Johnny Cameron on June 30.
For Goodwin’s part the timing is fortuitous – he will be cross examined on June 8, the day of the General Election, when the focus may well be on politicians fighting for their futures and not a disgraced banker fighting for what remains of his reputation.
RBS is legally obliged to provide lawyers for the former directors, but its legal costs have drawn sharp criticism as the bill escalates towards £125 million - including £6.5m defending Goodwin and his ex-bosses.
Three members of the influential Treasury Select Committee warned in April that RBS could face a parliamentary inquiry into the spiralling legal costs, which will make it one of the most costly civil defences in British history. One of them, Labour MP Rachel Reeves, said last month: “If RBS loses this case, the bank will have a lot of explaining to do to staff, shareholders and the public on why it spent a fortune on this case.”
The case comes after Chancellor Philip Hammond made the stark admission last month that his Government is prepared to sell its near 73 per cent stake in the bank at a loss to the public purse.
RBS is also hoping for a reprieve from the European Commission, which is considering a plan to spare it being forced to sell off 300 Williams and Glyn branches in return for state aid.
However, there are fears that the alternative £750m plan – meant to boost banking sector competition – may end up costing RBS more than the branch sale.
The bank has also yet to agree a potentially mammoth settlement with US authorities over mortgage-backed security mis-selling.
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